Fed Chair Jerome Powell says banks can serve crypto clients if risks are managed adequately

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Federal Reserve Chair Jerome Powell stated that banks are free to serve with crypto, provided they effectively manage the associated risks. 

During his speech following the ‎Federal Open Market Committee (FOMC) meeting, Powell added:

“The threshold has been a little higher for banks engaging in crypto activities, and that’s because they’re so new.” 

Despite this cautious approach, Powell emphasized that the Fed remains open to innovation in financial markets.

Additionally, the Fed chair quickly addressed allegations that crypto firms are having difficulties accessing banking services in the US, stating that the Fed is not interested in terminating legal customers.

Powell added that the Fed’s role in examining the relationship between banks and crypto is to analyze banks. He also acknowledged the industry’s regulatory challenges and said “a greater regulatory apparatus” would be helpful. 

Despite not endorsing crypto, the Fed chair’s brief mention led to optimism in the market, causing many assets to rally after the day’s slump.

Bitcoin (BTC) fell 1.5% to $101,417.24 after the FOMC revealed no interest rate cuts this month, potentially postponing further cuts until June. However, during Powell’s speech, especially after the mention of crypto, the BTC price rebounded 3.3% to touch $104,774.44.

Based on CryptoSlate data, the flagship crypto was trading at $103,740 as of press time.

Tone shift

The Fed chair’s speech comes nearly three weeks after the Federal Deposit Insurance Corporation (FDIC) interim Chair Travis Hill acknowledged the agency’s role in “debanking” crypto firms.

Although Hill did not mention “Operation Chokepoint 2.0,” he cited crypto-related businesses losing access to banking services without reasoning, calling such efforts “unacceptable.”

Operation Chokepoint 2.0 is an alleged effort by former President Joe Biden’s administration to hinder the crypto industry growth in the US by making it difficult to access banking services.

Hill also vowed to change the FDIC’s course and prevent future cases in which banks sideline crypto firms.

The House Committee on Oversight and Government Reform is also probing the alleged cases of crypto firms being debanked.

On Jan. 24, the Committee sent a formal letter to several entities related to crypto requesting evidence and accounts of such cases.